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Senate inquiry into effect of fuel tax suspension on inflation needed

MANILA, Philippines – A farmer from Nueva Ecija takes orders for onions at the Bureau of Plant Industry compound in Malate, Manila, 21 Sept. 2018, during a government-sponsored fruits and vegetable fair where produce are directly sourced from farmers. Senate Committee on Economic Affairs chair Senator Win Gatchalian said despite government efforts to mitigate the inflationary effects of the TRAIN Law, prices of goods and services in the country continued to soar in September 2018 with the inflation rate recorded at 6.7%. Photo by Mark Cayabyab/OS WIN GATCHALIAN

Senator Win Gatchalian has filed a resolution that seeks to conduct an inquiry, in aid of legislation, on the potential impact of suspending the fuel excixe tax on mitigating inflation.

Gatchalian, who chairs the Senate Committee on Economic Affairs, said he filed Senate Resolution No. 917 after President Rodrigo Duterte expressed his willingness to suspend the second tranche of the excise tax on fuel in 2019 to counter the effects of rising commodity prices.

Republic Act No. 10936 or the TRAIN Law provides for the automatic suspension of the excise tax on fuel if Dubai crude averages $80 per barrel for three months. The law provides for the increase of excise tax rates on petroleum products such as gasoline and diesel in three tranches, from January 1, 2018 to January 1, 2020.

“Despite government efforts to mitigate the inflationary effects of the TRAIN Law, prices of goods and services in the country continued to soar in September 2018 with the inflation rate recorded at 6.7% – the highest registered inflation in the last nine years and bringing the year-to-date inflation rate to 5.0%, well above the government’s target of 2-4% and breaching the 2018 inflation forecast of the Bangko Sentral ng Pilipinas (BSP) of 4.9% in August 2018,” Gatchalian said in his resolution.

“Additional inflationary pressures are expected to come from the following sources in the coming months: higher global oil prices; minimum wage hikes granted starting October; higher airline fares due to fuel surcharge; additional fare hike petitions by buses, taxi and jeepneys; weather disruptions which usually come in the 4th quarter of the year; and the further weakening of the peso,” he added.

Gatchalian said that, based on the Department of Energy’s data as of September 25, domestic pump prices year-to-date have risen P9.40 per liter for gasoline and P9.35 per liter for diesel.

“P2.65 o 28.2% ng price increase sa gasolina ay maattribute natin sa TRAIN samantalang P2.50 o 26.7% naman ang dinagdag nito sa presyo ng diesel,” he explained.

Moreover, the lawmaker said it is imperative for the inquiry to continue to “ventilate the issues related to the effective implementation” of the social mitigating measures of the TRAIN Law, not only with respect to the targeted beneficiaries, but also to Filipino families who consider themselves poor.

The third quarter survey of the Social Weather Stations showed that the number of families that saw themselves as poor rose to 52% – or equivalent to 12.2 million families – the highest since the 52% figure recorded in the fourth quarter of 2014. This number is also higher than the 10 million poorest households targeted as beneficiaries of the social mitigating measures of the TRAIN Law.

It was revealed during the previous hearing of the Committee on Economic Affairs that there were delays in the implementation of various social mitigation measures, including the 10 percent discount on rice sold by the National Food Authority (NFA), the Unconditional Cash Transfer program, and the Pantawid Pasada program. The NFA has admitted that it has yet to implement the 10 percent discount because no funding has been given by the Department of Budget and Management.

In the same hearing, Gatchalian called for the creation of a multi-agency task force that would be responsible for mitigating the effects of rising inflation in the country.

“I think the Department of Finance (DOF) can probably create a task force to address inflation. It can be a multi-sectoral and multi-departmental task force so that we can come up with a holistic approach to curbing inflation,” he said.